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RIP Housing Market. - Portrait of a Young Man as The Artist — LiveJournal
abmann
abmann
RIP Housing Market.
Fed: Hey, Banks? People can't pay those variable rate loans.
Banks: Holy crap! But don't people HAVE to pay our skyrocketing mortgages? Cuz that was a pretty good idea for us.
Fed: Well, no they don't really have to, per se. See, America has decided saving money is for suckers when you can have 16 iPods right now.
Banks: Wait, wait. But everyone before that used to pay those loans back all the time before. Why aren't they now?
Fed: True. But those mortgages didn't skyrocket two or three years into the loan, right?
Banks. Darn! You're right. But they can just declare bankruptcy and slowly pay back all the money, right?
Fed: Um. We made that really hard to do a few years ago, remember?
Banks: So you're saying that Americans were dumb enough to buy into our "low cost" loans without thinking about how to pay them off over time? And now they can't pay them back so we're out billions of dollars thereby molesting the American economy?
Fed: Yeah. Could you stop doing that?
Banks: You should have said something a few years ago, jerk.
Fed: Shut up. I can't hear my iPod.
--
Did anyone else see this coming? <raises hand>

Let me tell you, my whole "save up and buy a house plan?" Looking pretty good. And after the houses have sat for three years cuz the banks won't give loans to people with out cash upfront, I can get my dream home for a song.

Unrelated! 254 uses of Vinegar. Window cleaner? I'm never buy Windex again. Plus, I now have a use for all those stupid "News" papers that are nothing but advertisements.

Current Mood: satisfied satisfied

4 comments or Leave a comment
Comments
suburbaknght From: suburbaknght Date: March 28th, 2007 01:19 pm (UTC) (Link)
Can you explain how this cheap-ass loan dealie works?

Also, at some point I need to sit down with you and ask you how you researchand choose stocks.
abmann From: abmann Date: March 28th, 2007 01:28 pm (UTC) (Link)
Two kinds.

Variable interest rate: the interest rate used to calculate your mortgage changes based on an index the lender uses to market their cost to fund the mortgage. it means they can change the interest rate and recalculate your payment every month if contracted as such.

How it's good: In a strong economy, where the dollar is constantly appreciatying, your rates will ilkely go down because the lender would be making tons of money even with low interest.

Bad: The dollars adn the economy is NOT strong right now so lenders are upping interest rates all over the place to maintain their profitability in a volatile market.


Interest only mortgage.
Here you're paying only the interest your loan would accru over the loan term for the first few years. At the end of the term, the entire principal becomes due.

The good:
This one usually has an option of refinancing into a standard fixed interest rate loan at the end of the interest-only term. Savvy investors could actually benefit hugely from this loan by taking the money they would have been paying for a mortgage, investing it with other funds and then cashing that out to buy down the principal and then finance the rest. This would save them tens of thousands of dollars if played well.

The bad:
It is getting harder to refinance at the end of the term. Plus, 95% of Americans don't invest tis way and would never have the funds to do this, let alone pay for a house of the size they bought with a standard fixed rate mortgage.

In both instances people are ignoring the future costs which would more than likely increase dramatically. because they're dumb.

Wikipedia has a far more involved explanation of both.
abmann From: abmann Date: March 28th, 2007 01:33 pm (UTC) (Link)
I have a book you can read that I use to pick stocks. It's written by the guys at Fool.com Start reading Fool.com if you're not already. They're good and no-nonsense.

First and foremost, I pick companies I agree with and love their products. I currently own stock in Apple, Buffalo Wild Wings, Jones Soda and SanDisk. Each of these companies have the added benefit of having intelligent managers and do NOT operate with significant debt.

Buffalo Wild Wings and Jones are small-cap stocks and are have the potential for carving a very large niche for themselves in the market.

SanDiskand Apple are Mid- to large-cap so they will be stable but because of innovations they are both persuing have a very good chance of grabbing piles of market share a growing substantialy.

zesty_pinto From: zesty_pinto Date: March 28th, 2007 03:19 pm (UTC) (Link)
Warning: not all uses for vinegar are as effective as stated. My friend's mom used to try those many uses of vinegar and tried it as a windshield wash. It did nothing but contribute to the mess by making it streaky too.

I can see a Mythbusters episode coming on this.
4 comments or Leave a comment